By Stevie Kernick, Owner Emeritus, Account Manager
There’s not much fuss at all until the Federal Trade Commission comes knocking at the door of your association. Under what circumstances could your association be vulnerable to antitrust violations and how can you, as the chief staff officer of the association, protect your association against antitrust charges?
For most trade association, day-to-day activities are competitively neutral. Associations provide education for members, set guidelines for effective operations and represent the industry with local and federal government entities. Generally, these basic activities, undertaken by all trade associations do not present any antitrust risk.
But no trade association is immune to potential antitrust violations. Violations of the antitrust laws are actionable offenses even if they are committed through a trade association.
Congress passed the first antitrust law, the Sherman Act, in 1890 as a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade.”
Congress subsequently passed two additional antitrust laws: the Federal Trade Commission Act, which created the FTC, and the Clayton Act. These two along with the Sherman Act, are the core federal antitrust laws still in effect today.
The basic objective of all three of these laws is the same…to protect the process of competition for the benefit of the consumer by assuring incentives for businesses to operate efficiently, keep prices down and keep quality up.
In addition to these federal statutes, most states have antitrust laws that are enforced by state attorneys general or private plaintiffs. Many of these statutes are based on the federal antitrust laws.
Here are the key antitrust issues that affect trade associations:
- Price Fixing – It is illegal for a trade association to control or suggest pricing to members, or for competitors to decide among themselves a method of pricing to achieve uniformity. Pricing information should NEVER be discussed among competitors.
- Bid Rigging – It is illegal to coordinate bidding among competitors.
- Market Division or Customer Allocation – It is illegal to systematically divide market areas and customers among competitors.
- Group Boycotts – Any company may, on its own, refuse to do business with another firm, but an agreement among competitors not to do business with targeted individuals or businesses may be an illegal boycott, especially if the group of competitors working together has market power.
- Other Agreements Among Competitors – Competitors may not collectively decide to use a standardized contract, establish uniform hours of operation, utilize the same methods of accounting or transportation methods or set restrictions on advertising content.
Trade associations frequently offer their members important benefits with the potential to improve efficiency and control costs. When an association of competitors withholds these benefits from nonmembers, the nonmember may be disadvantaged and the restriction may harm competition and keep prices high.
There is also the potential for the association to become involved in antitrust issues which occur during association-sponsored events, but without the knowledge or involvement of the association’s leadership. At the opening of all association events or meetings, members should be advised of the importance of adhering to antitrust laws and what to do if such discussions transpire.
An association whose members are under-fire for antitrust violations by the Department of Justice can expect to be drawn into the investigation, at the least, with a subpoena to produce documents – reams of them.
Best to take deliberate steps to avoid the fuss altogether.
Want to know more about association management? Contact us at info@imiae.com to find out more about what IMI Association Executives can do for your organization.